(10) Inventory Determination, Without Planned Costs, Without Milestone Billing
Use
You can use the method
Inventory Determination, Without Planned Costs, Without Milestone Billing
for:
Sales orders
Projects
You can use the method
Inventory Determination, Without Planned Costs, Without Milestone Billing
to:
Calculate inventories in the amount of the actual costs if the actual revenue is zero
Calculate the cost of sales in the amount of actual costs if actual revenue is not zero
The inventory is canceled as soon as actual revenues are received.
Note the following:
You cannot create reserves.
This method is unsuitable for milestone billing because such billings result in final cancellation of the capitalized costs.
There is no proportionality between the cost of sales and the revenue:
As soon as revenue is received, the actual costs are considered cost of sales in full. In other words, the cost of sales is not proportional to actual revenues as with the revenue-based method, nor is it proportional to the quantity sold as with the quantity-based method.
You do not need any planned data.
Sales and administration costs are always reported and settled as cost of sales.
Prerequisites
Choose a results analysis method in simplified Customizing for
Product Cost by Sales Order
under
Period-End Closing
Results Analysis
Valuation Method
.
Features
If R(a) = 0 then C(PA) = 0 and C(z) = C(a)
If R(a) <> 0 then C(PA) = C(a) and C(z) = 0
R(PA) = R(a)
Example
Period 01
In period 01 you have actual costs of USD 20,000 but no revenues. In results analysis, the system calculates the following data:
Cost of sales affecting net income of USD 0
Revenue affecting net income of USD 0
Capitalized costs of USD 20,000
You then settle the following:
The capitalized costs to FI and EC-PCA
No cost of sales and no revenues to CO-PA
The following values are reported in CO-PA:
Profitability Analysis
Actual revenues |
0 |
Calculated cost of sales |
0 |
Profit |
0 |
The income statement shows the following values:
Income Statement
Expense |
Revenue |
Actual costs 20,000 |
Inventory increase Capitalized costs 20,000 |
20,000 |
20,000 |
Period 02
In period 02 actual costs increase to USD 130,000. You deliver to your customer and send an invoice for USD 200,000. The order is now fully delivered and fully invoiced. In results analysis, the system calculates the following data:
Cost of sales affecting net income of USD 130,000
Revenue affecting net income of USD 200,000
Capitalized costs of USD 0
You then settle the following:
The cost of sales to CO-PA
The revenues to CO-PA
The cancellation of the capitalized costs to FI and EC-PCA
The following values are reported in CO-PA:
Profitability Analysis
Revenues (actual revenues) |
200,000 |
Cost of sales (actual costs) |
130,000 |
Profit |
70,000 |
The income statement shows the following values:
Income Statement
Expense |
Revenue |
Actual costs 130,000 |
Actual revenues 200,000 |
Profit 70,000 |
|
200,000 |
200,000 |
The profit on your sales order is USD 70,000.